Even modern writers resent the fact that despite the “absence of indigenous sources of gold and silver” the “very favourable export-import balance” resulted in “inherent strenghth of the Indian economy”.

Further, it has been correctly observed that in “our period the subcontinent drew vast amounts of gold and silver, exceeding previous periods and exceeding all other parts of the contemporary world so far.”

It should not escape notice that gold and silver, after circulating in every other quarter of the globe, come at length to be absorbed in Hindostan. (from Travels in the Mogul Empire By François Bernier, Irving Brock)

“in exchange for textiles, spices and other Indian agricultural and industrial products, merchants from across Europe and Asia flooded India’s bazaar’s with dinars, tangas, ducats, guilders, reals, francs, rixdollars (reichthalers) and countless other varieties of coins, all of which were minted into rupees. (from The Indian diaspora in Central Asia and its trade, 1550-1900 By Scott Cameron Levi)

Moving away from Central Asia, the general European economy, was simple –

On the other side, Britain had a large debt due to WWI – principally to the US of A and India. Groaning under the weight of WWI debt, Britain took the easy way out to assuage the impatient creditor – US of A. Britain and America stuck a deal at the cost of the Indian subjects of the British Raj. They paid the US in gold – sourced from South Africa, Ghana, Australia and Canada – and instead bought silver from the US at inflated prices, to settle Indian debts.

Gold prices were deflated. Interest rates in India were increased. Restrictions on gold (and even silver) imports on were placed and gold demand in India was ‘normalized’. Subsequently, even payments in silver became difficult. India then started getting paid by Bank Of England credit notes.

So, finally, it was the Indian native, who was forced to finance the WWI!

Modern restrictions on gold exports to India

Between WWI end and the start of the WWII, it was clear that India would not stay a colony for long. Indian independence would happen sooner than later. Between 1920-40, in a series of measures, policy decisions were taken, which made Indian interests subsidiary and inferior to Western interests. Central bankers from the USA, Britain, France and Germany had many meetings to “coordinate monetary policy.” The agenda – gold flow management between themselves and an obvious understanding– don’t let Indians get the gold.

Indians were paid, with inflated and abundant silver stock, instead of gold. This silver was the same silver released by the Pittman Act – a “buffer to protect Western gold reserves against the Indian drain …” Of course, later the British Raj decided to settle Indian debts with promissory notes – and not even silver. It was this Indian ‘sacrifice’ which enabled the recovery of the West.

They (Hjalmar Schacht, Governor, Reichsbank, Charles Rist, Deputy Governor, Banque de France, Benjamin Strong, USA Federal Reserve, Montagu Norman, Bank Of England) agreed that Indian demand for gold had a “…deflationary effect on global liquidity,” therefore Indian demand for gold had to be regulated.”

in the spring of 1926, when Norman induced Strong to support him in fiercely opposing a plan of Sir Basil Blackett’s to establish a full gold-coin standard in India. Strong went to the length of traveling to England to testify against the measure, and was backed up by Andrew Mellon and aided by economists Professor Oliver M.W. Sprague of Harvard, Jacob Hollander of Johns Hopkins, and W. Randolph Burgess and Robert Warren of the New York Reserve Bank. The American experts warned that the ensuing gold drain to India would cause deflation in other countries (i.e., reveal their existing over-inflation) (from America’s Great Depression By Murray N. Rothbard, Chapter 5, The Development of the Inflation; Ludwig von Mises Institute)

The New York Timeswrote how“it was most important for the Allies to agree on a policy that would prevent the Huns from capturing the very valuable raw materials which can be obtained in India, and sometimes in India alone.” Further, The New York Times went on and stated“how without Indian products there would be greater difficulty in winning the war.”

On October 27th, 1931, the Ramsey Macdonald led “National” Government (Conservatives and Liberals coalition, fearful of the rising Labour Party) in Britain won a huge majority of 554 MPs of 615. The economic crisis of September (misnamed as the Indian Currency Crisis), ensuing Depression era problems in the US, the Weimar Republic problems – and other issues pushed this ‘National’ government to ram through a series of measures (page 130-131) that depressed silver and gold prices and raised interest rates in India.

On the opposite side of the world, a beleaguered Indian Prime Minister was celebrating 24 years of Independence with a “ship-to-mouth” economy, dependent on PL-480 grain. Private gold reserves in the Indian economy after nearly 25 years of post-colonial rule, were steadily rising. Over the next 10 years, the Western world (and most of the rest) blamed OPEC for post-1971 inflation, gold scaled US$800 an ounce; the Hunt Brothers launched their bid to corner the silver market; stagflation made an entry and Soviet power grew. Nixon Chop, itself the result of many years of gold reserves erosion, was one in many steps that brought the US$ to its knees – only to be saved by the Oil-dollar tango.

From the 1960-1990, the Big Issue for people across large parts of the world was Big Crime. The 1960-1990 peak in organized crime, globally, is interesting due to the synchronized time frames – across USA, Europe and India.

In India, the rise of the underworld was delayed by a decade – as was its decline. India’s underworld, centred in Mumbai, at its peak, intruded into trade unions, films and entertainment, gambling, real estate, extortion and smuggling. The specter of Dawood Ibrahim haunts India-Pakistan Governmental relations – even today.

From 1939, (the start of WWII), gold imports into India, the world’s largest market and also the largest private reserve of gold, were controlled or banned. Not only the largest, but Indian reserves of gold, are also the only significant reserve in the world without a history of war, genocide, slavery or loot, (unlike US, UK, Canada, Australia) or due to nature’s bounty (unlike South Africa, China, Peru, Ghana, etc.).

The first effect of restrictions on gold imports in India was on prices. Indian gold prices, on an average, were 30%-40% higher than international prices. The other thing that happened was that gold imports went underground. Gold imports (illegal), called smuggling, spawned the biggest criminals that India has seen.

The common threads in this were, of course, America, drugs, underworld, war, corruption, warlords – but what made all this possible was Indian appetite for gold.

All this was made possible by the Indian hawala system of money exchange. Hawala made money transfers safe, instantaneous, at a low-cost. Traditional Indian ships from a thousand ports in Goa, Maharashtra and Gujarat sailed with this contraband and brought back gold.

Golden Triangle & Golden Crescent

The countries comprising these Golden Triangle /Crescent are India’s neighbours. The Indian underworld transported drugs through India. These drug shipments originated, were acquired, grown and traded from the Golden Crescent and the Golden Triangle.

The US eliminated gold ownership restrictions in 1975. India followed. In 1992, India started its first hesitant steps towards legalizing gold imports. By 1995, these import control laws had been diluted to near non-existence. With the dilution of restrictions on gold imports came the abatement in the biggest crime wave in modern history.

Today, the abatement in organized crime is ascribed to vigourous efforts by the police and legal systems. The earlier lack of success is conveniently forgotten. Many ‘encounter’ specialists claimed credit for the reduction in the power of the India’s underworld. Much like the fading away of the mafia in the US and Italy, in India too, after the gold trade was legalized, the mafia’s source of power, liquidity, earnings, profit were taken away. With it came the underworld’s loss of power and influence. And that coincided with the reduction and control of organized crime from the US and Europe and India. And an end to the greatest crime wave in the modern history.

So, why this desperate poverty

With global monetary system in a flux and the decline of the dollar (especially after the Plaza Accord), the perceived utility of gold and the price outlook of gold has been positive. After the Nixon chop, at an estimated 15,000-18,000 tons, India was in a position to create instruments, obtain leverage and create wealth from the world’s largest gold reserves.

then that country will be able to bolster their gold reserves position by: –

About 10,000-15,000 tons

Limit the cost of purchase

Make it economically nonviable for anyone else to match them

The only country that can (currently) match these criteria is the USA – and China.

The US GATA Committee has been running a low profile campaign on gold price manipulation. This attempt, if successful, at increasing gold prices will possibly make it difficult for Indians to buy gold in larger quantities. The Indian Central Bank, preoccupied with a developmental agenda, is in no position to take up this challenge.

From an Indian standpoint

While the silver lining is private reserves, we have a blinkered RBI & GOI response. India has one of the lowest monetary reserves of gold in the world. Against a global average of 10.5% RBI holds only 3.4% of its reserves as gold. The EU holds 40% of its reserves in gold and USA – 70%.

Making the job easier for the GOI and the RBI are Indian economic habits of the centuries that have allowed this build up of gold reserves. India stands at a historical cross-road. Are Indian economic and political minds at work to exploit this window of opportunity.

This short look at Western history makes the linkage plain. The main cause is the pattern of gold ownership by Governments and war becomes a fait accompli.

Gold Reserves - Global (2ndlook estimates)

What Should We Do With Gold

Just sell it to people. From all the countries of the world.

The world financial organization should limit control of global gold output by any mining organization to 10% or a single mine – which ever is lower. Gold holding should be widely dispersed, as widely as possible, among individuals – like the Indian gold possession model. No national government, in the new financial architecture should be allowed to have more than 250 tons of gold – to progressively reduce to 50 tons.

What this will do, is disperse gold holdings among the citizens of the world – and dilute the ability of nations to wage war! National Governments (like the US), have used gold looted from their own citizens (and others) to deprive other peoples of the world of gold – and wage war.

The simplistic logic of this theory is that the world should ‘go back’ to the Gold Standard – or as some put it, improve the ‘corrupted Gold Standard’ of the 19th century, and then everything will be fine. All currencies of the World, should be indexed to gold, currency can be redeemed against gold – and gold reserves equal to currency should be kept as reserves. This will kill inflation, stop war, make politicians honest, make tax payers honest, citizens hard-working and business efficient.

Two years ago …

its (gold) reserves by 454 tons to 1,054 tons through domestic purchases and refining scrap metal, Hu Xiaolian, head of the State Administration of Foreign Exchange, said in an interview with the Xinhua News Agency today. China, the world’s biggest gold producer, has increased its holdings before, Hu said in the interview carried on the administration Web Site. They rose from 394 tons to 500 tons in 2001 and to 600 tons in 2003. The U.S. has the world’s biggest gold holdings at 8,134 tons, followed by Germany with 3,413 tons, World Gold Council data show. France has 2,487 tons and Italy 2,452 tons, while the IMF has 3,217 tons, according to the council.

The increase makes China the world’s fifth-largest holder of gold, just ahead of Switzerland, and among the six nations plus the International Monetary Fund that have reserves of more than 1,000 metric tons. Although Hu did not elaborate on where China had sourced the additional bullion, her comments were interpreted as meaning they came from domestic sources and may included refining of scrap metal. Traders also say the gold was accumulated systematically over a number of years. Last year China ranked as the world’s largest gold producer with 12.2% of world output, equivalent to 288 metric tons. The U.S. ranked second with a 9.9% share, or 234 metric tons.

China should increase its gold reserve from 600 tons to about 2,500 tons in a short term and to 3,000 tons in a long term to cope with the versatile exchange rate risks, said Teng Tai, an economist of China Galaxy Securities Company.

Of course, this really does not mean much – except that it may keep gold prices on boil. Whether a currency is backed by a 5% or a 10% gold reserve may not mean much, in this era of rampant use of (not just by the US of A)“a technology, called a printing press” as an economic tool. For long term economic stability, gold needs to be in the hands of individuals.

1. What I have done is provide a link to your blog. That, in my book, deserves a thanks – and not a rebuke.
2. My entire focus and accent is on Gold and bullion – whereas your entire (a well researched one, I am glad to note) article (http://independentindian.com/2007/02/12/india-in-world-trade-payments/ ) does not even use the phrase gold reserve once; you have used the word bullion – nil times and word gold – 4 times. (Kindly press “Control F” and check.).
3. I have not gone thru various other articles that you have authored and mentioned in that blog – and hence cannot comment on the same.
4. In my 3xA4 page blog I have provided more than 40 links – which is in itself a reference and acknowledgement.
5. Therefore, your remark on the use of your material is completely unfounded and incorrect. There is no part of the blog which does not point to the source and provide a link or gives a link for further info.

Trust this clarifies. However, if there is any element of usage which you believe is unfair, kindly do be specific – and I shall immediately withdraw the same.

[…] British propagated and showed India as a defeated civilisation. Invaded, pillaged and dominated. Inferior and poor. Technologically backward. This is the history that is taught in schools and exists in popular […]

[…] practically, 1939, (the start of WW2) gold imports into India, the world’s largest market and also the largest private reserve of gold, were controlled or banned. Not only the largest, but Indian reserves of gold, are also the only […]

It is anarchy and non-democratic forces still working in this country.It appears to me that our fancy for Gold(indians) has deprived the poor of their basic needs.We have exported the essentials for GOLD. Really ugly thing.It is really a good thing if gold prices increases and no one will be able to buy it. Hence our meager resources will be spent on poor rather than buying gold, or is it that we drain more resources, only time will tell.

i believe that all loots of alexender and other european , is right now under rothschild family, and world most famous and rarely seen itoms( coins, stones, etcra ) are prsnt in rothschild custdy, even big bite of so called american gold ( fort knox) is also under roths, and they creating shortage of gold . bcoz of they have much more money and powar, ppl think america and england have rule but actuly ruling roths. they sponsrd wars and giving loan to both side of war,

In my opinion, This is the second best blog by an Indian on the internet.
The best is at http://www.singularity2050.com/
But this is the best blog dealing with all issues related to India.
Your love for India shines through in this blog
Your analysis is cool, level headed and cogent. It is miles ahead of any Indian mainstream media analysis
It is light years ahead in content
Thanks Buddy, Wish more Indians thought like you.

1. Indian gold imports for the last few decades have been released by the World Gold Council. I have included a graph for that. Based on these figures, India has imported close to 10,000 in the last 20 years alone.

2. There is a clear historical trend which shows that India has been the world’s largest importer for most of history.

3. If India has imported 10,000 tonnes in the last 20 years, what were the imports in the last 2000 years. Last 5000 years.

4. If you take these inflows the figure will be close to 50,0000 tonnes, which seems improbable. India lost a lot of gold during the

– British Raj,– Mughal rule,– To Islamic raiders, etc.

Match this inflow figure with reality. India does not seem to have 50,000 tons.

I have also included a graph which calculates gold in an average Indian family in 5 different income classes.

Thanks for clarifying, Anurag.This article is one of the most interesting pieces I have ever read. It would really be great if someone found out the amount of gold in each country.
I am still a bit incredulous about the final number of 26600 because it is really very difficult to calculate private gold holdings. However, by having a model for this calculation, you have stuck your neck out and have made a claim that has some substantiation. The 10000 tonnes of imported gold gives a concrete mark from where one could start. The actual figure could well be 40000 tonnes or 20000 tonnes as figures during the import ban era and pre-independence cannot be known but it would not matter as the amount is still very large.
Great work.

This, without any doubt, is one of the most insightful articles I have ever read on this topic. People like yourself should be dictating the economic policies of India. Your blog is doing an amazing job of educating wayfaring strangers. Some day, I hope, people with a similar strategic bent of mind will hold the reigns of my country. Thank you, for every single word you have shared with your readers.

Wonderful Analysis – Holds true in 2013 as well. When will Chidambaram and Raghuram Rajan think of doing away with customs duty on import of gold and enable India to continue to accumulate secret reserves in gold? Because one day fiat currency will surely collapse and we will have to switch back to a commodity backed currency, probably one linked to gold and oil

The links here may be of interest, especially my 3 Dec 2012 Delhi talk, and my GDI Impuls Zurich interview on the idea of a new — notional — Mohur… Gold as such should not be made a fetish of by anyone, it is merely one among many assets in the modern world economy where the volumes of world real trade are so vast that there is no single asset that can possibly act as a unique world money http://independentindian.com/2013/11/23/coverage-of-my-delhi-talk-on-3-dec-2012/

BONJOUR ; Your article is a real treat for all educated persons . I have rarely seen , posted on the web , such a fundamental , clear and well documented analysis on the subject of gold holdings and policies . It does concern all of us not only India . As an old european I can tell that what we are witnessing is a war , a secret war , for the ownership and control of physical gold , using jointly fiat currencies and fiat paper gold , behind the scene , to control and maintain the existing western grip on power and wealth through an unlimited emitting and supply of phony money . Unfortunately this phony money , printed at will , is backed not by a real Economy but the threat of real War .

More than any other cultural bloc, people of the West need to have private holdings of gold.

Unfortunately, most Westerners are happy with temporary wealth & prosperity created by their elites, built on war, loot, slavery. A move to gold will bring down Western prosperity not by a notch or two – but much more.

Anuraag , China is building , secretly , actively , day after day , an impressive gold reserve . When I visit african jewellers today , asking for native nuggets ( which I collect ) the answer is : there are none , all gone , bought by chinese merchants all over African villages in all countries , on the spot in cash or merchandises . same for gold dust .
I am not tallking of big mines but of thousands of traditionnal villagers used to go to the river sands or to the unexploited gold fields to make some provision which they called : pot d’or ; It has always been that way . gold was widely found and sold . Not any more : gone to China . even more , each time the gold price goes down on the london metal exchange , chinese buyers take delivery of the physical bars in the London vaults and have them shipped to switzerland to have them recast and refined in order to make sure that they are not fake gold bullions ( tungstene gold coated bars ! ) From then on they are shipped to some free ports where they vanishe before heading secretly to hong kong and mainland China .
If you add to that the annual gold chinese production of more or less 500 metric tons a year for the last 10 years ( maily from Thibet ) you start to see a real picture of what is really going on and is not widely reported .
To conclude : the balance of power is slowly but steadily shifting eastward ;
Now it’s clear THEY still have weapons : drones , missiles , and satellites for spying , etc … as a currency of last resort !.

Bonjour Anuraag ,
I did read your article : ” China bullion reserves – gold , silver & silk ” . As always in your writings , historical big trends are plainly and clearly described . Somewhere in your text you state : “when China resisted the opium flood , western traders resorted to war . ” well , History repeats itself ! Resistance to the US will bring war . See Russia to day and the eastern Ukrainian battlefield where US proxy Nato , secret military units and military supply builds up on a daily basis : a very nasty threat to Europe’s already shaky condition . Add to that the simultanous orchestrated offensive decline in gas and oil prices which can not be a coincidence . Strategically , Europe is the logical future zone of turmoil , to not say battlefield : it has no army left , no economic power , it’s loaded with debts , it depends entirely on imported fossile fuels , native population is aging and does not renew itself , immigration from southern countries is out of control , integration of newcomers does not work , jobs disappear by the day and deflation is impoverishing the majority , ie the 99% , the so called : working class , when the politicians bow respectfully to the US will and power . There is no Charles De Gaule left to resist that trend .
I have no idea of what is going on in India . The medias in Europe are definitely short of providing any valid articles , except may be in english , and all of the latin speaking countries or german speaking or slavic speaking nations do not
report on that subject , that’s a fact .
Wisdom is missing ! vedic teaching is forgotten , dismissed , discarded …
I wonder what the wake up call will bring , and when …
Anyhow , I wish us a wonderful day !

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Quicktake focusses more on current events, recent events, reports, media buzz, matters of topical interests. Typically, Quicktakes are shorter than 2ndlook. Sometimes a few Quicktakes, morph into a 2ndlook post.